23 April 2008 No: 08/08 Stable development for ASSA ABLOY despite weak sales in the first quarter First quarter As expected, the sales trend in Western Europe and North America was weak during the quarter, while growth remained strong in Asia, Africa and South America. The gross margin continued to improve through increased efficiency. Substantial investments in new products are being made. Sales totaled SEK 8,203 M (8,227), with 0% organic growth, 3% acquired growth and exchange-rate effects of -3%. Operating income (EBIT) amounted to SEK 1,244 M (1,289) a decrease by 3% after negative currency effects of SEK 52 M, representing a margin of 15.2% (15.7). Net income amounted to SEK 772 M (803). Earnings per share amounted to SEK 2.08 (2.16) a decrease by 4%. SALES AND INCOME Full year First quarter 2006 2007 Change 2007 2008 Change Sales, SEK M 31,137 33,550 +8% 8,227 8,203 +0% of which, Organic growth +7% +0% Acquisitions +5% +3% Exchange-rate effects -1,131-4% -275-3% Operating income (EBIT), SEK M 4,771* 5,458 +14% 1,289 1,244-3% Operating margin (EBIT), % 15.3* 16.3 15.7 15.2 Income before tax, SEK M 4,100* 4,609 +12% 1,101 1,055-4% Net income, SEK M 1,756** 3,368 +92% 803 772-4% Operating cash flow, SEK M 3,528 4,808 +36% 805 583-28% Earnings per share (EPS), SEK 7.99* 9.02 +13% 2.16 2.08-4% * Excluding restructuring costs for 2006 amounting to SEK 1,474 M for the year. ** Excluding restructuring costs, net income in 2006 was SEK 2,988 M for the year.
COMMENTS BY THE PRESIDENT AND CEO ASSA ABLOY achieved a stable development in the first quarter despite the weak sales trend. As a result of efficiency improvements the gross margin continued to improve. I am also very pleased to conclude that there was continued strong growth on the emerging markets, which increased their sales by more than 20%. Investments in product development continued to be substantial and will give us many exciting new products going forward, said Johan Molin, President and CEO. FIRST QUARTER The Group s sales totaled SEK 8,203 M (8,227), which was unchanged compared with 2007. In local currencies the increase amounted to 3% (14), of which organic growth for comparable units was 0% (8) while acquired units accounted for 3% (6) of the increase. Exchange-rate effects had a negative impact of SEK 275 M on sales, i.e. 3%. Operating income before depreciation, EBITDA, amounted to SEK 1,476 M (1,518), a decrease of 3% compared with 2007. The EBITDA margin was 18.0% (18.5). The Group s operating income, EBIT, amounted to SEK 1,244 M (1,289), a decrease of 3%, after negative currency effects of SEK 52 M. The operating margin was 15.2% (15.7). Net financial items amounted to SEK 189 M (188), which corresponds to an average interest rate of about 5.2%. The Group s income before tax amounted to SEK 1,055 M (1,101), which represents a decrease of 4% on the previous year. After translation of the subsidiaries income statements, exchange-rate effects had a negative impact of SEK 46 M on the Group s income before tax. The profit margin was 12.9% (13.4). The Group s tax charge totaled SEK 283 M (298), corresponding to an effective tax rate of 27% for the quarter. Earnings per share amounted to SEK 2.08 (2.16), which represents a decrease of 4%. RESTRUCTURING MEASURES The comprehensive restructuring program initiated in April 2006 proceeds according to plan. The program includes some 50 individual restructuring measures. The roles of a large number of production units will be changed to focus mainly on final assembly, and some units will be closed. The cost of the program is assessed at SEK 1,274 M and it is expected to generate cost savings of about SEK 600 M a year once the whole program is completed in 2009. The full cost of the program was expensed in 2006. Payments related to the restructuring program amounted to SEK 111 M during the quarter. Savings during the quarter resulting from measures carried out are assessed at SEK 55 M compared with the same period last year. The quarterly rate of savings from the start of the program now amounts to SEK 100 M. So far 1,534 out of the total of 2,000 employees affected by the restructuring program have left the Group.
COMMENTS BY DIVISION EMEA Sales in the EMEA division totaled SEK 3,473 M (3,444), with organic growth of -2% (+9). The sales trend slowed on the West European markets but was more positive on the growth markets in Eastern Europe, the Middle East and Africa. Easter had a negative impact on volume growth. Acquired growth amounted to 2%. Operating income amounted to SEK 567 M (593), which represents an operating margin (EBIT) of 16.3% (17.2). Return on capital employed amounted to 21.0% (22.7). Operating cash flow before interest paid totaled SEK 241 M (376). AMERICAS Sales in the commercial segment in the Americas division increased during the quarter, although the pace of growth slowed, mainly because there were fewer working days in the quarter. The sales trend in the residential segment was negative, as in the previous quarter. Total sales amounted to SEK 2,422 M (2,607), with 2% organic growth. Acquired growth was 0%. The operating margin improved further from an already good level and amounted to 19.3% (19.0). Return on capital employed amounted to 22.0% (22.3). Operating cash flow before interest paid totaled SEK 226 M (449). ASIA PACIFIC Sales in the Asia Pacific division grew strongly on the Asian markets and sales in Australia and New Zealand where stable. Sales totaled SEK 692 M (539), with 4% organic growth. The new acquisitions, Baodean and irevo, were consolidated from the fourth quarter 2007 and acquired growth was 25%. Operating income improved as a result of volume growth and price increases and amounted to SEK 54 M (41), which represents an operating margin (EBIT) of 7.8% (7.7) despite the expected dilution, mainly from irevo, which amounted to 1.0 percentage point. The return on capital employed amounted to 8.4% (8.0). Operating cash flow before interest paid totaled SEK 85 M (45). GLOBAL TECHNOLOGIES The Global Technologies division reported continued growth, partly due to the launch of a number of new products, with sales of SEK 1,158 M (1,167) in the first quarter of which organic growth accounted for 3%. Acquired growth amounted to 2%. Growth was good in Hospitality and in HID excluding the newly merged ITG. The decrease at ITG was due partly to non-recurring bulk orders in the first quarter in 2007, and partly to a selective phasing-out of some customers. The merger of HID and ITG proceeded according to plan and will in time yield good effects on both sales and production. Operating income amounted to SEK 160 M (163), which represents an operating margin (EBIT) of 13.8%
(14.0). Return on capital employed amounted to 13.2% (12.8). Operating cash flow before interest paid amounted to SEK 40 M (25). ENTRANCE SYSTEMS The Entrance Systems division reported sales of SEK 697 M (668) in the first quarter, representing organic growth of 3%. During the quarter growth slowed in Europe and North America but remained very strong in the division s newly established operations in Asia. Acquired growth amounted to 3%. Operating income amounted to SEK 89 M (86), which represents an operating margin (EBIT) of 12.7% (12.8). Return on capital employed amounted to 11.0% (11.0). Operating cash flow before interest paid amounted to SEK 173 M (177). ACQUISITIONS No significant acquisitions were consolidated during the first quarter. On 15 February it was announced that the EMEA division has acquired 20% of the Swedish security wholesaler Copiax, a leading supplier to locksmiths, security installers and the building trade, and that ASSA ABLOY thus owns 31% of the shares in Copiax. ASSA ABLOY has made an offer for the outstanding shares, and if approval is received from the competition authorities the acquisition is expected to be completed in the second quarter. On 18 February it was announced that the Asia Pacific division has signed an agreement to acquire the security-door business of Beijing Tianming (BJTM). BJTM is one of China s leading companies in the sale and manufacture of fire-rated steel security doors for the Chinese market. SUSTAINABLE DEVELOPMENT During the quarter ASSA ABLOY continued work to implement its declared 20-point program of sustainable development. For the second successive year ASSA ABLOY has published its Sustainability Report, which is available both in print and on the Group s website. The Sustainability Report details the advances made during the year, which include reductions in the use of solvents and the release of greenhouse gases, and the targets set for the period up to 2010. Updated information about sustainable development is published on the Group s website. PARENT COMPANY Other operating income for the Parent company ASSA ABLOY AB totaled SEK 480 M (176) for the first quarter. Income before tax amounted to SEK 381 M (789). Investments in tangible and intangible assets totaled SEK 0 M (1). Liquidity is good and the equity ratio was 47.8% (47.6).
ACCOUNTING PRINCIPLES ASSA ABLOY applies International Financial Reporting Standards (IFRS) as endorsed by the European Union. Significant accounting and valuation principles are detailed on pages 67-71 of the 2007 Annual Report. New or revised IFRS effective after 31 December 2007 have had no material effect on the consolidated income statements or balance sheets. The Group s Interim Reports are prepared in accordance with IAS 34. The Parent company applies RFR 2.1. TRANSACTIONS WITH RELATED PARTIES No transactions that significantly affected the company s position and income have taken place between ASSA ABLOY and related parties. RISKS AND UNCERTAINTY FACTORS As an international Group with a wide geographic spread, ASSA ABLOY is exposed to a number of business and financial risks. The business risks can be divided into strategic, operational and legal risks. The financial risks are related to such factors as exchange rates, interest rates, liquidity, the giving of credit, raw materials and financial instruments. Risk management in ASSA ABLOY aims to identify, control and reduce risks. This work begins with an assessment of the probability of risks occurring and their potential effect on the Group. For a more detailed description of risks and risk management refer to the 2007 Annual Report. No significant risks other than the risks described there are judged to have occurred.
OUTLOOK*) Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well. Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability. *)This was the outlook published on 13 February 2008: Organic sales growth is expected to continue at a good rate. The operating margin (EBIT) and operating cash flow are expected to develop well. Long term, ASSA ABLOY expects an increase in security-driven demand. Focus on end-user value and innovation as well as leverage on ASSA ABLOY's strong position will accelerate growth and increase profitability. Sales growth and profitability during the first quarter will be affected negatively by the Easter effect. This is expected to be recovered during the second quarter. Stockholm, 23 April 2008 Johan Molin President and CEO
This Interim Report has not been reviewed by the Company s Auditor. FINANCIAL INFORMATION The Interim Report for the second quarter will be published on 30 July 2008. The Annual General Meeting will be held on 24 April at the Museum of Modern Art (Moderna Museet) in Stockholm. Further information can be obtained from: Johan Molin, President and CEO, Tel: +46 8 506 485 42 Tomas Eliasson, Chief Financial Officer, Tel: +46 8 506 485 72 ASSA ABLOY is holding an analysts meeting at 14.00 today at Klarabergsviadukten 90 in Stockholm. The analysts meeting can also be followed on the Internet at www.assaabloy.com. It is possible to submit questions by telephone on +46 8 5052 0270, +44 208 817 9301 or +1 718 354 1226. ASSA ABLOY discloses the information provided herein pursuant to the Securities Markets Act and/or the Financial Instruments Trading Act. The information was submitted for publication at 12:30 CET on 23 April.
FINANCIAL INFORMATION - GROUP INCOME STATEMENT Jan-Dec Jan-Mar Jan-Mar SEK M SEK M SEK M Sales 33,550 8,227 8,203 Cost of goods sold -19,751-4,844-4,820 Gross Income 13,799 3,383 3,383 Selling and administrative expenses -8,351-2,095-2,140 Share in earnings of associated companies 9 1 1 Operating income 5,458 1,289 1,244 Financial items -849-188 -189 Income before tax 4,609 1,101 1,055 Tax -1,240-298 -283 Net income 3,368 803 772 Allocation of net income: Shareholders in ASSA ABLOY AB 3,358 803 772 Minority interests 10 1 0 EARNINGS PER SHARE Jan-Dec Jan-Mar Jan-Mar SEK SEK SEK Earnings per share after tax and before dilution 1) 9.18 2.19 2.11 Earnings per share after tax and dilution 2) 9.02 2.16 2.08 CASH FLOW STATEMENT Jan-Dec Jan-Mar Jan-Mar SEK M SEK M SEK M Cash flow from operating activities 3,871 689 509 Cash flow from investing activities -2,127-610 -290 Cash flow from financing activities -1,568-257 -530 Cash flow 176-178 -311
BALANCE SHEET 31 Dec 31 Mar 31 Mar SEK M SEK M SEK M Intangible fixed assets 18,708 18,534 17,861 Tangible fixed assets 5,345 5,187 5,127 Financial fixed assets 1,089 1,348 1,109 Inventories 4,399 4,302 4,389 Trade receivables 5,537 5,682 5,488 Other non-interest-bearing current assets 1,221 1,032 1,303 Interest-bearing current assets 1,433 1,076 1,285 Total assets 37,732 37,161 36,562 Equity 15,668 14,736 15,703 Interest-bearing non-current liabilities 9,205 8,729 8,858 Non-interest-bearing non-current liabilities 863 831 785 Interest-bearing current liabilities 5,285 6,285 4,943 Non-interest-bearing current liabilities 6,711 6,580 6,273 Total equity and liabilities 37,732 37,161 36,562 CHANGE IN EQUITY Jan-Dec Jan-Mar Jan-Mar SEK M SEK M SEK M Opening balance 1 January 13,645 13,645 15,668 Dividend -1,189 - - Minority interest, net 135-4 - Exchange difference for the period -291 292-737 Net Income 3,368 803 772 Closing balance at end of period 15,668 14,736 15,703 KEY DATA Jan-Dec Jan-Mar Jan-Mar Return on capital employed, % 18.4 17.4 16.9 Return on shareholders' equity, % 21.0 21.1 17.9 Equity ratio, % 41.5 39.7 42.9 Interest coverage ratio, times 7.4 7.6 7.1 Interest on convertible debentures net after tax, SEK M 55.0 8.6 19.4 Number of shares, thousands 365,918 365,918 365,918 Number of shares after dilution, thousands 380,713 376,033 380,713 Weighted average number of shares after dilution, thousands 378,533 376,033 380,713 Average number of employees 32,267 31,564 33,015
FINANCIAL INFORMATION - PARENT COMPANY INCOME STATEMENT Jan-Dec Jan-Mar Jan-Mar SEK M SEK M SEK M Operating income 760 46 293 Income before tax 2,351 789 381 Net income 2,154 803 383 BALANCE SHEET 31 Dec 31 Mar 31 Mar SEK M SEK M SEK M Non-current assets 16,439 15,349 16,445 Current assets 14,881 15,540 15,197 Total assets 31,320 30,889 31,642 Equity 14,753 15,131 15,124 Provisions 91-73 Non-current liabilities 6,454 5,278 6,349 Current liabilities 10,022 10,480 10,096 Total equity and liabilities 31,320 30,889 31,642
QUARTERLY INFORMATION - GROUP THE GROUP IN SUMMARY (All amounts in SEK M if not noted otherwise) Q1 Q2 Q3 Q4 Full Year Q1 12 month 2007 2007 2007 rolling Sales 8,227 8,329 8,274 8,721 33,550 8,203 33,527 Organic growth 3) 8% 7% 7% 6% 7% 0% Gross income 3,383 3,425 3,405 3,587 13,799 3,383 13,800 Gross income / Sales 41.1% 41.1% 41.2% 41.1% 41.1% 41.2% 41.2% Operating income before depreciation (EBITDA) 1,518 1,554 1,625 1,670 6,366 1,476 6,325 Gross margin (EBITDA) 18.5% 18.7% 19.6% 19.1% 19.0% 18.0% 18.9% Depreciation -229-229 -221-230 -909-232 -912 Operating income (EBIT) 1,289 1,325 1,404 1,440 5,458 1,244 5,413 Operating margin (EBIT) 15.7% 15.9% 17.0% 16.5% 16.3% 15.2% 16.1% Financial items -188-197 -193-271 -849-189 -850 Income before tax 1,101 1,128 1,211 1,168 4,609 1,055 4,562 Profit margin (EBT) 13.4% 13.5% 14.6% 13.4% 13.7% 12.9% 13.6% Tax -298-306 -327-309 -1,240-283 -1,225 Net income 803 822 884 859 3,368 772 3,337 Allocation of net income: Share holders in ASSA ABLOY AB 803 820 882 854 3,358 772 Minority interests 1 2 2 5 10 0 OPERATING CASH FLOW Q1 Q2 Q3 Q4 Full Year Q1 12 month 2007 2007 2007 rolling Operating income (EBIT) 1,289 1,325 1,404 1,440 5,458 1,244 5,413 Depreciation 229 229 221 230 909 232 912 Net capital expenditure -101-218 -220-212 -751-164 -814 Change in working capital -469-159 53 550-25 -581-137 Paid and received interest -124-216 -149-245 -734-162 -772 Adjustment for non-cash items -19-4 -3-23 -49 14-16 Operating cash flow 4) 805 957 1,306 1,740 4,808 583 4,586 Operating cash flow / Income before tax 4) 0.73 0.85 1.08 1.49 1.04 0.55 1.01
CHANGE IN NET DEBT Q1 Q2 Q3 Q4 Full Year Q1 2007 2007 2007 Net debt at beginning of the period 13,560 13,799 14,534 13,456 13,560 12,953 Operating cash flow -805-957 -1,306-1,740-4,808-583 Restructuring payment 44 81 90 209 424 111 Tax paid 173 433 258 400 1,264 127 Acquisitions 509 92 341 434 1,376 126 Dividend - 1,189 - - 1,189 - Translation differences 318-103 -461 194-52 -320 Net debt at end of period 13,799 14,534 13,456 12,953 12,953 12,414 Net debt / Equity, times 0.94 1.02 0.91 0.83 0.83 0.79 NET DEBT Q1 Q2 Q3 Q4 Q1 2007 2007 Long-term interest-bearing receivables -139-161 -197-105 -102 Short-term interest-bearing investments -79-119 -261-220 -332 Cash and bank balances -998-1,549-979 -1,212-953 Pension provisions 1,337 1,239 1,213 1,156 1,151 Other long-term interest-bearing liabilities 7,392 8,218 8,002 8,050 7,707 Short-term interest-bearing liabilities 6,285 6,906 5,678 5,284 4,943 Total 13,799 14,534 13,456 12,953 12,414 CAPITAL EMPLOYED AND FINANCING Q1 Q2 Q3 Q4 Q1 2007 2007 Capital employed 28,535 28,822 28,198 28,621 28,116 - of which goodwill 17,375 17,237 17,077 17,270 16,508 Net debt 13,799 14,534 13,456 12,953 12,414 Minority interest 59 56 56 201 181 Shareholders' equity (excl minority interest) 14,677 14,232 14,686 15,467 15,521 DATA PER SHARE Q1 Q2 Q3 Q4 Full Year Q1 12 month 2007 2007 2007 rolling SEK SEK SEK SEK SEK SEK SEK Earnings per share after tax and before dilution 1) 2.19 2.24 2.41 2.34 9.18 2.11 9.10 Earnings per share after tax and dilution 2) 2.16 2.20 2.36 2.30 9.02 2.08 8.94 Shareholders' equity per share after dilution 2) 42.46 43.68 44.68 46.76 46.76 46.64
RESULTS BY DIVISION Global SEK M EMEA 5) Americas 6) Asia Pacific 7) Technologies 8) Entrance Systems Other Total Jan - Mar and 31 Mar respectively 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 2007 2008 Sales, external 3,345 3,364 2,594 2,408 488 636 1,140 1,103 659 691 8,227 9) 8,203 9) Sales, intragroup 99 109 14 14 51 56 27 55 9 6-199 -240 Sales 3,444 3,473 2,607 2,422 539 692 1,167 1,158 668 697-199 -240 8,227 8,203 Organic growth 3) 9% -2% 6% 2% 6% 4% 13% 3% 7% 3% 8% 0% Operating income (EBIT) 593 567 496 467 41 54 163 160 86 89-93 -93 1,289 1,244 Operating margin (EBIT) 17.2% 16.3% 19.0% 19.3% 7.7% 7.8% 14.0% 13.8% 12.8% 12.7% 15.7% 15.2% Capital employed 9,825 10,261 8,937 8,147 2,095 2,462 5,085 4,982 3,132 3,074-539 -810 28,535 28,116 - of which goodwill 4,781 4,806 5,392 4,569 1,016 1,168 3,638 3,408 2,547 2,558 17,375 16,508 Return on capital employed 22.7% 21.0% 22.3% 22.0% 8.0% 8.4% 12.8% 13.2% 11.0% 11.0% 17.4% 16.9% Operating income (EBIT) 593 567 496 467 41 54 163 160 86 89-93 -93 1,289 1,244 Depreciation 111 111 56 50 16 20 33 37 10 9 3 4 229 232 Net capital expenditure 11-65 -41-44 -15-17 -43-26 -7-7 -6-5 -101-164 Movement in working capital -339-373 -63-247 2 28-128 -131 89 82-30 60-469 -581 Cash flow 4) 376 241 449 226 45 85 25 40 177 173 948 731 Adjustment for non-cash items -19 14-19 14 Paid and received interest -124-162 -124-162 Operating cash flow 4) 805 583 Average number of employees 12,289 12,117 9,749 8,843 4,889 6,881 2,546 2,819 1,993 2,238 98 117 31,564 33,015 EMEA 5) Americas 6) Asia Pacific 7) SEK M Technologies 8) Entrance Systems Other Total Global Jan - Dec and 31 Dec respectively 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 2007 Sales, external 12,165 13,073 10,104 10,166 2,082 2,558 4,108 4,805 2,678 2,949 31,137 10) 33,550 10) Sales, intragroup 344 405 38 54 227 222 112 117 37 38-758 -836 Sales 12,509 13,477 10,142 10,220 2,309 2,780 4,220 4,922 2,715 2,987-758 -836 31,137 33,550 Organic growth 3) 8% 7% 10% 5% 4% 10% 12% 11% 11% 6% 9% 7% Operating income (EBIT) 1,972 2,295 1,945 1,995 213 322 612 754 368 432-339 -340 4,771 5,458 Operating margin (EBIT) 15.8% 17.0% 19.2% 19.5% 9.2% 11.6% 14.5% 15.3% 13.6% 14.4% 15.3% 16.3% Restructuring costs -1,059 - -169 - -93 - -152 - -1 - - - -1,474 - Operating income (EBIT) incl restructuring costs 913 2,295 1,776 1,995 120 322 460 754 367 432-339 -340 3,297 5,458 Capital employed 9,183 10,055 8,545 8,595 1,974 2,520 4,911 5,181 3,121 3,149-529 -879 27,205 28,621 - of which goodwill 4,631 4,926 5,076 4,928 955 1,211 3,568 3,640 2,453 2,566 16,683 17,270 Return on capital employed excl restructuring costs 19.1% 21.9% 22.3% 22.7% 10.8% 13.8% 15.5% 14.7% 11.5% 13.7% 17.1% 18.4% Operating income (EBIT) 913 2,295 1,776 1,995 120 322 460 754 367 432-339 -340 3,297 5,458 Restructuring costs 1,059-169 - 93-152 - 1 - - - 1,474 - Depreciation 468 433 231 218 64 69 87 138 39 38 9 12 898 909 Net capital expenditure -251-351 -199-141 -109-56 -127-164 -30-14 -23-22 -739-751 Movement in working capital -290-111 -253 140-56 -40-146 -29-45 41 86-27 -704-25 Cash flow 4) 1,899 2,267 1,724 2,211 112 294 426 699 332 497 4,226 5,591 Adjustment for non-cash items 10-49 10-49 Paid and received interest -708-734 -708-734 Operating cash flow 4) 3,528 4,808 Average number of employees 12,283 12,493 9,641 9,428 5,099 5,445 2,183 2,650 1,926 2,137 111 113 31,243 32,267 1) Number of shares, thousands, used for the calculation amount to 365,918 for all periods. 2) Number of shares, thousands, used for calculation: Jan-Mar: 380,713 (376,033); Jan-Dec 2007: 378,533. 3) Organic growth concern comparable units after adjustment for acqusitions and currency effects. 4) Excluding restructuring items. 5) Europe, Middle East and Africa. 6) North, Central and South America. 7) Asia, Australia and New Zealand. 8) ASSA ABLOY Hospitality and HID Group. 9) Sales Jan-Mar 2008 (2007) by Geography: Europe 4,051 (4,051), North America 2,876 (3,078), Central and South America 159 (135), Africa 124 (112), Asia 548 (427), Pacific 444 (423). 10) Sales Jan-Dec 2007 (2006) by Geography: Europe 15,924 (14,834) North America 12,503 (12,155), Central and South America 583 (510), Africa 506 (457), Asia 2,127 (1,579), Pacific 1,908 (1,602).